Following “delays”, Saipem has come to an agreement with Harland and Wolff (LON: HARL) to de-scope a contract for the NNG wind farm off Fife.
The offshore and maritime engineering firm has consequently announced it will focus on “smaller contracts” moving forward for its former Bi-Fab yards at Methil and Arnish, which have been handling the project.
Releasing its half-year results today, Harland and Wolff said it has experienced complications and delays while carrying out a contract with Saipem for the fabrication of eight wind turbine generator jackets for the NNG project.
The project, mainly based out of Methil, has encountered issues when a “number of client materials arriving late” and being defective in nature rendering them incapable of being used.
Harland and Wolff said “both parties have recognised the difficulties in meeting the project schedules due to these problem”.
The deal was originally worth £26.5 m when it was announced in April last year, however, due to the difficulties encountered both parties came to an agreement that will involve de-scoping the contract from eight jackets to four jackets for a sum of £23.
HARL shares are down 15% today.
Following the revised deal, the Irish firm has decided to focus more heavily on smaller contract values of between around £4 million and £10 million per contract for the Methil and Arnish yards.
The two facillities, formerly owned by Burntisland Fabrications (BiFab), are situated in Fife and the Isle of Lewis respectively.
NNG (Neart na Gaoithe) is a planned wind farm nine miles off Fife, operated by EDF Renewables.
The scheme is expected to be operational in 2023.
The company has also been carrying out work on the Islandmagee gas storage project.
Harland & Wolff wrote: “This project has highlighted the length of time it takes to develop key strategic infrastructure and the inefficiencies surrounding the development of such projects”, acknowledging that full scale operation is “still a few years away.”
The Company is currently in a judicial review process in relation to the grant of the project’s marine licence, with court hearing dates set for November this year.
The firm stated: “The Company is afforded confidence from its legal counsel that the judicial review will find in the Company’s favour.”
The firm has also reported in its h1 findings a “cost of sales” of over £12 million in the first half of 2022.
The company spent £12,031,833 while reporting revenues of £15,413,527.
Spending was up by nearly £10 million, compared to the same time from the year previous.
Profits were also up for the Irish engineering firm as it took home a gross profit of £3,381,694, a significant increase since 2021’s £1.4 m.
At the end of the period, consolidated cash and cash equivalents were down more than three million from 2021, falling from £5.7 m to £2.29 m.
Total equity and net assets stood at just over £3.6 m, a massive decrease from the near. 24.6 m from the year before.
In the unaudited interim results report the company writes: “Going into the second half of the current financial year, we are seeing a significant increase in revenues from the key projects that were contracted at the beginning of Q3 2022.”
The Company continues to maintain its guidance of achieving revenues of between £65 million and £75 million at the end of the financial year 2022.
Harland & Wolff Group Holdings chief executive, John Wood, said: “Our business model and strategy remain robust and has been validated not only by the fact that we are now operational in all five markets, but also by external counterparties such as Riverstone who have invested on the basis of a sound business strategy.
“We have a growing reputation in our markets and I remain very optimistic about the trajectory of the Company.
“After a slow start this year, we have now gained significant momentum with the rapid execution of three major contracts.
“As we announce these interim results, we have a backlog of over £100 million, a record level for the Company, affording us strong future visibility of revenue.”
This report arrives at a time when Harland & Wolff has appointed a new chief strategy and transformation officer.
Ian Ure has two decades of corporate experience with “technology innovation and business creation” having worked in the UK and abroad, he is also an award-winning consultant and author.
Mr Ure will be taking on the newly created position and will focus on shaping Harland & Wolff into a higher-performing organisation, instigating digital transformation and disruption, as well as preparing the organisation for the future – according to the Irish firm.
Throughout his career, has successfully taken three start-up ventures to market.
Prior to joining Harland & Wolff, Mr Ure founded a specialist strategic change consultancy which led a number of high-profile projects including landing the vision and target operating model for the UK Shipbuilding Enterprise which is part of the National Shipbuilding Strategy.